Bankruptcy court may play a key role in GM class-action lawsuits

The class-action lawsuits against General Motors (GM) in response to an allegedly defective ignition system are getting more complex, with new issues relating to the location of any trials and the role of past bankruptcy proceedings.

Motions from attorneys regarding efforts to consolidate various cases against GM are due on April 25. There are about 55 or 60 cases against GM, one source estimated, and a national multidistrict litigation panel will meet on May 29 in Chicago to consider whether the cases will be consolidated and, if so, where the class-action cases would be heard.

One plaintiff’s attorney involved with the case, Adam J. Levitt, director at Grant & Eisenhofer and leader of the law firm's Consumer Practice Group, has said that the Central District of California would be the best spot for the trial. He now adds the Northern District of California as another preferred option.

He points out that these locations have the largest number of cars and the federal courts there have had experience with similar cases. Many of the cases against GM were filed in these two districts in California. The Central District of California is also where the Toyota accelerator case was heard. That case ended in a settlement of $1.1 billion.

“I don’t know what the panel is going to do,” Levitt said on Wednesday, adding that the two California districts are “optimal places.”

“We’re prepared to aggressively litigate our clients’ interests in any courts they send them to,” he added.

In a related matter, Levitt criticized GM for filing a motion this week in the bankruptcy court in the Southern District of New York, attempting to force the plaintiffs to sue the “old GM,” as opposed to the new GM, which came about after GM went through 2009 bankruptcy proceedings.

“You can’t go after old GM because they no longer exist,” Levitt said. “They’re trying to engage in an end-run of sorts.”

Even if the GM argument was sound, which Levitt says is not the case, over 840,000 of the cars were manufactured and sold after the bankruptcy and “are not subject to subject to anything in bankruptcy court.”

He also echoed some other recent skepticism about GM possibly concealing what they knew about the key system from the bankruptcy court. The law requires companies going through bankruptcy proceedings to be honest and transparent, Levitt said.

“They concealed and continued to conceal until early this year – all of these problems,” Levitt claims.

A judge in the bankruptcy case, Robert E. Gerber, has called for a case status conference on May 2, and Levitt’s legal team is using a Dallas bankruptcy attorney, Sander Esserman, who wants to take part in the proceedings.

“If the court so desires and it makes sense, I would be pleased to serve as liaison counsel for the purpose of trying to organize these various plaintiff groups into a more cohesive presentation, although such task could be a challenge,” Esserman said in a recent letter to Gerber.

Some of the other plaintiffs have filed motions in the bankruptcy case and have not given the judge’s approach a chance to work itself out.

InsideCounselreported earlier this week that GM has asked the bankruptcy court to rule on whether the growing number of lawsuits alleging purely economic damages resulting from the ignition switch recall may proceed. The newly filed motion does not concern accidents or injuries. In fact, the motion says it “does not address any litigation involving an accident or incident causing personal injury, loss of life or property damage.” And it adds it “does not involve whether New GM should repair the ignition switch defect. New GM has committed to replacing the defective ignition switch as a result of the recall.”

The total number of recalled vehicles is now about 2.6 million. The plaintiffs are blaming at least 13 deaths and 31 crashes on the allegedly defective ignition system.

“General Motors has taken responsibility for its actions and will keep doing so,” a spokesman for the company said in a statement sent to InsideCounsel on Tuesday. “GM has also acknowledged that it has civic and legal obligations relating to injuries that may relate to recalled vehicles, and it has retained Kenneth Feinberg to advise the company what options may be available to deal with those obligations.”

Meanwhile, questions are mounting if GM will be able to use its being broken up into old GM and new GM as a shield to protect itself from the class action lawsuits.

“Over all, it seems that the bankruptcy case will probably mean that G.M. has no legal obligation to pay a good chunk of these claims,” Stephen J. Lubben, a professor at Seton Hall Law School, recently wrote in The New York Times.